Nymex Light Crude encountered solid resistance at $60/$61 per barrel. Reversal below $58 would signal retracement to test the new support level at $54. Respect would indicate an up-trend, while failure of $54 would test primary support at $44. Brent Crude [green] is already retracing and likely to test support at $54.
Core CPI continues to track close to the Fed target of 2.0 percent (CPI All Items is distorted by falling oil prices).
Long-term interest rates are in a primary up-trend, with 10-year Treasury note yields breakout above resistance at 2.25% offering a target of 3.0 percent. Rising 13-week Twiggs Momentum above zero strengthens the signal.
The Dollar Index continues to test support at 95. Breach would warn of a test of the primary level (and rising trendline) at 93. A sharp decline on 13-Week Twiggs Momentum indicates this is likely.
A weakening dollar would boost demand for gold, but rising interest rates counter this. Spot gold broke medium-term support at $1180/ounce, warning of a test of the primary level at $1140. 13-Week Twiggs Momentum peaks below zero suggest continuation of the primary down-trend. Failure of $1140 would offer a long-term target of $1000*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
This chart from Westpac highlights Australia’s export misery:
Iron ore prices are falling faster than shipments are rising. Andrew Hanlan sums up the the problem facing the Australian economy:
A jump in imports coincided with a sharp fall in export earnings. Critically, the rest of the world is paying us considerably less for our key exports, iron ore and coal. This negative shock is squeezing incomes for businesses, households and government alike.
Spot gold retreated to test medium-term support at $1180/ounce. Breach of support would indicate a test of the primary level at $1140. 13-Week Twiggs Momentum peaks below zero suggest a primary down-trend. Failure of $1140 would offer a target of $1000*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
Nymex light crude encountered resistance at $60/barrel. Expect retracement to test the new support level at $54/barrel. Respect would indicate a primary advance, while failure would suggest recent gains are no more than a bear market rally and another test of $44 is likely. 13-Week Twiggs Momentum below zero continues to reflect a primary down-trend.
CPI continues below zero, but core CPI (excluding food and energy) came in at 1.81% for April 2015, indicating long-term inflationary pressures are constant.
Low inflation relieves upward pressure on bond yields. The yield on 10-year Treasury notes encountered resistance at 2.25%, with tall shadows on the last 3 weekly candles. Expect another retracement to test support at 1.85%. Reversal of 13-week Twiggs Momentum below zero would strengthen the signal.
* Target calculation: 2.25 + ( 2.25 – 1.85 ) = 2.65
The Dollar Index broke resistance at 96 despite falling bond yields, indicating the correction is over and another test of 100 likely. 13-Week Twiggs Momentum is declining, but recovery above the descending trendline would support the (bull) signal. Reversal below 96 is unlikely, but would test support at 93.
The inflation-adjusted price of gold (gold/CPI) suggests that gold has further to fall. Unusually high levels of intervention by central banks in financial markets may, however, be fueling support at current prices — suggesting a gradual decline rather than a sharp adjustment.
Spot gold is headed for another test of medium-term support at $1180/ounce after respecting resistance at $1220. Breach of support would test the primary level at $1140. 13-Week Twiggs Momentum peaks below zero suggest a primary down-trend. Failure of $1140 would test the long-term target of $1000*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
Ichimoku is roughly translated as ‘one glance’ and is intended as a complete trading system. Developed by Japanese journalist Goichi Hosoda in the 1960s, the aim of Ichimoku is to present the entire picture of long- and short-term price action in a single chart. ‘Cloud’ refers to the appearance of the Senkou A and B indicators (plotted 26 periods ahead of the current period) which indicate overall bullishness or bearishness of the market. Price action above the cloud is bullish, below the cloud is bearish, while within the cloud is uncertain. A green cloud further strengthens a bull signal, or weakens a bear signal, while a red cloud does the opposite.
The weekly chart shows a strong bear trend, with price action below a predominantly red cloud. The latest candle, however, penetrated the lower border of the cloud, indicating a period of uncertainty. Given the overall bearish posture of the chart, price action is likely to resolve to the downside and reversal below the cloud would generate a short signal, especially if confirmed by the fast MA (blue Tenkan) below the slow MA (red Kijun). Recovery above the upper border of the cloud is unlikely, but would signal reversal to an up-trend.
You can find further details on Ichimoku Cloud at Incredible Charts: Ichimoku Cloud and Daily FX: A Walk Through Ichimoku.
Whoops. Try again. Chinese cement production. (From Capital Economics this AM) pic.twitter.com/k5W7pdRR2c
— A Evans-Pritchard (@AmbroseEP) May 13, 2015
Lowest cement production in more than 10 years reflects the decline in infrastructure investment. Not good news for Australian resources stocks. Where cement production goes, iron ore and coal are likely to follow.
The (5-year) inflation breakeven (Treasury yield – TIPS) recovered from the oil price fall to post 1.66% on May 8.
Growth in average hourly earnings (manufacturing – production and non-supervisory employees) also recovered to 1.49% at the end of April.
The stronger inflation outlook lifted the yield on 10-year Treasury notes above resistance at 2.25%. Recovery of 13-week Twiggs Momentum above zero also signals an up-trend. Target for the breakout is 2.65%*. This is a bearish sign for bonds, but only breakout above long-term resistance at 3.00% would signal that the secular bull market is over.
* Target calculation: 2.25 + ( 2.25 – 1.85 ) = 2.65
The Dollar Index found support at 94 in response to rising yields. 13-Week Twiggs Momentum is declining, but recovery above 96 would suggest that the correction is over and another test of 100 likely. Otherwise, expect strong support at the primary trendline around 92.
Gold is testing medium-term support at $1180/ounce. Breach would test the primary level at $1140. 13-Week Twiggs Momentum holding below zero suggests continuation of the primary down-trend. Failure of $1140 would test the long-term target of $1000*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
Inflation-adjusted crude oil prices are close to their 2008 low, but if we look back to the 1980s and 1990s, prior to China’s entry into the markets (apart from a brief spike in September 1990) that was the 20-year high.
Nymex light crude rallied since breaking resistance at $54/barrel, but this does not necessarily indicate a reversal. Only retracement that respects the new support level (at $54) would confirm this a primary up-trend rather than a bear market rally.
